Microcredit reaches poorest

Over half the people in the world survive on an income of less than one dollar a day, making it difficult to escape life in the slums. One new town in Kenya, however, is changing that near-impossibility; thanks to microcredit loans funded through Jamii Bora, the mortgage price of a one-room shack equals that of a five-room house.

According to information released by the Microcredit Summit Campaign on Jan. 26 in a phone conference, Jamii Bora and other microcredit organizations provide loans that allow the world’s poorest people to rise above the dollar-a-day poverty line by providing them with funds to start their own small business.

More than 154 million of the world’s poorest families received a microcredit loan in 2007, surpassing the goal of 100 million by 2015, the Microcredit Summit Campaign said, which, according to their Web site (http://microcreditsummit.org), brings together people interested in changing the world through microcredit.

"This is a tremendous achievement that many people thought was far too difficult to reach," 2006 Nobel Peace Prize Laureate Muhammad Yunus said of the numbers during the press conference. "What makes it even more remarkable is that loans to more than 100 million very poor families now touch the lives of more than half a billion family members around the world. That is half of the world’s poorest people."

The number of families aided represents a growth rate of 1,300 percent from fewer than 8 million in 1997 to 106 million in 2007, said Sam-Daley-Harris, founder and director of the Microcredit Summit Campaign.

"Today we celebrate surpassing the goal of reaching 100 million of the world’s poorest families with a microloan in a single year," Daley-Harris said in a press conference announcing the figure, noting that it took the majority of 2008 to compile the data.

The Microcredit Summit Campaign has revised its goals for 2015 and hopes to reach 175 million families with microcredit loans, helping lift them above the dollar-a-day poverty threshold, Daley-Harris said.

Yunus, founder of Grameen Bank in Bangladesh, began his own microcredit program in 1976, lending money to those stricken by poverty in Bangladesh. His first loan, made to 42 women so they could expand their bamboo furniture-making business, was only $27.

While many skeptics once wondered about the program’s ability to succeed, the Microcredit Summit Campaign reported that the bank has achieved a 98 percent repayment rate from clients.

"I just kept doing what was next," Yunus said. "But when I looked back, my strategy was whatever banks did, I did the opposite. If banks lent to the rich, I lent to the poor. If banks lent to men, I lent to women. If banks paid large loans, I made small ones."

As a result, Grameen Bank does not face the financial setbacks currently plaguing major lenders. Because the microcredit loans are less linked to the economy than to social causes, there is little risk of financial hardship, Daley-Harris said.

Yunus said that, although the world’s richest entrepreneurs will lose money in this financial crisis, the real impact is on the poor people, the bottom 50 percent of 3 billion.

"This is a direct impact of the financial crisis. And microcredit … helps them stay afloat," Yunus said. "Without that they would be in real bad situations. The more we can expand the system the better it is so that they can find their own solutions to the problems."

One of the innovators highlighted in the summit report was Jamii Bora, the Kenyan microfinance institution founded by Ingrid Munro in 1999 with loans to 50 female beggars in Mathare Valley Slum in Nairobi. The organization now has 200,000 members.

Jamii Bora’s current project is a new town built through providing subprime mortgages to some of the poorest people in the world but doing so in a way that gets the fundamentals right, Mundro said.

"Every person’s dream is to move out of the slums, not patch up the slums," Munro said.

According to information released by the campaign, the new town has 2,000 houses and 3,000 business spaces. Each house has two bedrooms, a kitchen, a living room and a bathroom, and the monthly mortgage is the same as a one-room shack in the slums.

Munro said that, even in the midst of poverty, microcredit loans give hope to people who have none.

"You can be a thief. You can be a beggar. You can be a prostitute," she said. "It is possible to get out of that poverty and that situation and get to a better life."

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Title: Microcredit reaches poorest | Author: Melissa Steffan | Section: News | Published Date: 2009-01-28 | Internal ID: 5860